Fixed Income Credit Analysis Model - Calculate Yields

This year the curriculum replaced the rather conceptual reading of risks involved in fixed income investments with a fairly quantitative one by Jarrow. I’m having a hard time going through the formulas.

Does anyone know how to calculate the Risk-free Zero-Coupon Yields in the tables of Example 8 on pp. 285-288? I’m trying to duplicate the tables in Excel. If you can, just give me the formula to one cell and I’ll be fine. I know that he gave you the yields in questions 1-3, but I was wondering how he came up with the yields for Q4-5.

Another problem I ran into with Example 8 for quesitons 1-3 is that the today’s date is not what the question says if you want to get the correct Years to Maturity. The formula I’m using is Years To Maturity = (Payment Date - Today’s Date) / 365. For example, if you want to get a Yrs to Mat = 3.6384, then your start date should be 2/10/2011, as opposed to 08/11/2011. Did he make a mistake or did I? Can anyone explain?

I don’t have the curriculum (took L2 a couple years back). And there are more than a few folks like me hanging around. Without the curriculum, we can’t help. So scan/sceencap the problem and attach it.

The only rub with that is that it might violate CFA Institute’s copyright. AnalystForum’s pretty sticky about that (as they should be).

Sorry about that - didn’t mean to transgress (or cause others to).

Hi busprof,

Thanks for responding. Would you mind if I email you the pdf, if AnalystForum is so strict about it? My address is



I’m having trouble with how he calculated the PV in Q1-3…what formula is it that he used?

Can anyone dumb down the calculation for PV (risk free) or PV (risky)?? I mean like actually calcuator commands…

I cannot seem to come up with the correct answers any where

Based on this data here:

-3%, 5year bond

Payment date Risk Free rate Credit spread

6/30/2001 0.15 0.13

12/31/2001 0.22 0.17

6/30/2002 0.25 0.18

12/31/2002 0.27 0.21

What are the calculator commands to calculate PV (risky) at year 2 for example?

  • I can speak for the official curriculum:

  • First note that there is errata on this section for level-2, read that first on cfa website.

  • Second, note that it says these rates are continuously compounded…so use exp(-rt), so in EOC or BB simply use the formula (CF * exp(-rT)), you will get the right value of PV

The above table i realise is from Schweser the formula exp(-rT) does seem to work for risk free rate but it doesnt seem to work for Risky PV, so cant really speak for this third party provider…